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A Manufacturing Lesson From Tesla Motors

The rise of Tesla Motors TSLA +14.29% is as much about tech innovation as it is about manufacturing excellence, something that Tesla is trying to improve and serves as a good case study for other green tech businesses.

Tesla is seeing more demand than it could handle partly because its suppliers haven’t been able to fill Tesla’s orders, said Tesla’s CEO, Elon Musk, during an earnings call Wednesday. Some suppliers are now scrambling to increase their production while others are finding it difficult to do so promptly, he added.

“Some suppliers thought we wouldn’t be around” for long, Musk said, “So they didn’t tool up for the production we actually experienced.”
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The supply problem is a big deal because it means Tesla could generate more revenues otherwise. In fact, securing an adequate supply of auto parts and running enough production lines to meet demand are the unsexy part of the Tesla story. But they are crucial for Tesla’s longevity and its responsibility to deliver good returns for its shareholders.

The electric car company already exceeded its shipment goal by delivering 5,150 instead of 4,500 cars during the second quarter. The company began its first delivery to Europe this week and plans to expand its reach in Asia, particularly China, later this year. Tesla is selling Model S the sedan and working on rolling out Model X the SUV starting late next year.


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